Occupy Wall Street group puts 'zombie' debt to rest

May 10, 2013
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Norbert Logsdon, seated, and his wife, Shirley Logsdon, are happy that her medical debt, just under $1,000, was abolished thanks to the efforts of the Rolling Jubilee fund, an offshoot of Occupy Wall Street. / Sam Upshaw Jr., The Courier-Journal, Louisville, Ky.

The New York-based nonprofit Rolling Jubilee fund says it is in the process of buying almost $12 million in outstanding old bills nationwide for pennies on the dollar in an effort to liberate debtors who often cannot afford to pay. And it intends to buy more as it gets more money from donors.

"It is the Rolling Jubilee's position that it is making a tax-free gift to the people whose debt it is abolishing," the organization says on its website. This debt is unpaid bills that creditors sell to collection agencies at a discount and collection agencies sell among themselves, what Rolling Jubilee calls a "shadowy speculative market of debt buyers who then turn around and try to collect the full amount from debtors."

Sometimes those debts have been paid off, were settled in bankruptcy court or had an expiration on their statute of limitations. But debt collectors often try to revive a claim, cajoling a debtor to make even a small payment so the entire debt can be resurrected legally.

Critics call this "zombie" debt because obligations that people thought were long dead come back to haunt them - and can get new life if a debtor gets intimidated and makes the wrong moves.

"We're going into this market not to make a profit but to help each other out and highlight how the predatory debt system affects our families and communities," the Rolling Jubilee Fund says. "Think of it as a bailout of the 99% by the 99%."

Shirley Logsdon, 80, is one of 1,064 people in the Louisville area who has benefited.

She thought Medicare had paid her delinquent $983 bill for back pain care last year. That's what her doctor told her after a 2011 dispute during which the bill had gone to a collection agency, she said.

"I am very happy that somebody paid it," said Logsdon, the first debtor in this area to publicly identify herself. "In fact, I had quit worrying about it when we didn't get any more notices that we owed it."

Rolling Jubilee spokesman Thomas Gokey said all of the half dozen or so Louisville-area debtors who contacted the fund after being notified last month that their debt was forgiven said they were unaware their medical bills still were owed.

Each got a letter from Strike Debt, the sponsor of Rolling Jubilee, like the one Logsdon received, telling her she no longer owed the $983.

"It is gone, a no-strings-attached gift," the letter said.

Logsdon said she was relieved but also irritated because she thought insurance had already paid - a reaction that Gokey said was typical of those who didn't know their debt still was sloshing around in the financial system.

The $1.12 million in Louisville-area debt bought by the Rolling Jubilee Fund came from six physicians here, said Fred Melroy, the billing and finance director for the medical practice management firm CureMD in New York City. In January, the Rolling Jubilee fund purchased the entire bundle for $10,000.

Melroy said the doctors, who work for Louisville Inpatient Physician Services, want anyone who received a letter from Strike Debt to know that they indeed are free from those debts.

"I would believe that any patient with disputed debt would welcome a letter saying for whatever reason we are canceling your debt," he said.

Medicare and Aetna, Logsdon's former insurance company, had disputed who should pay her bill, But Melroy said an investigation Tuesday, prompted by a Courier-Journal query, concluded that Medicare should have paid it.

The doctors' previous billing agency is to blame for not sorting that out sooner, he said.

Melroy said his company became responsible for collecting the doctors' receivables in 2011. The physicians were unsure which of the delinquent medical debts their previous billing agency managed already had been paid. Instead, they decided to sell the debt for an average 1 cent on the dollar to the Rolling Jubilee Fund.

"The last thing they would want would be to harass any patient whose debt was not validated or could not pay for economic reasons," Melroy said in an email.

"They kept sending me bills saying the insurance company refused it and Medicare refused it, and then finally, they turned it over to a collection agency," said Logsdon's 83-year-old husband, Norbert.

Shirley Logsdon's medical records, which she provided, show she had an overnight hospital stay and diagnostic tests, including an X-ray and CAT scan.

Logsdon's daughter, Mary Ann Seger, said the numerous phone calls with her mother, the doctors' office and the collection agency in 2012 were "a nightmare."

Then the collection agency stopped calling.

"We assumed everything was good," Seger said.

She had mixed feelings about the notice from Rolling Jubilee that the debt had been paid off.

"It keeps coming back," Seger said. "You can't kill it. If it had been billed properly and handled properly, the debt wouldn't even have been there."

Since the recession, the debt collection industry has ballooned, according to the Federal Trade Commission. But the way the delinquent debts are sold, as a bundle of thousands of different debts, can lead to errors.